My last blog in which I talked about financial procrastination raised some ire among readers who missed the basic premise.   People by nature never have enough money to satisfy their wants and needs.  And it is true, the standard of living in some Western countries is higher than here in Israel.  However, one hundred years ago, the general standard of living in all of those countries was also well below current standards and people learned to manage on what they made.  And if they were smart, they even managed to save some of their meager wages for a rainy day.

We need to prioritize in order to direct our resources (whatever they are) to the immediate and long-term issues that are most important to us.  Compare it to going on a trip without a road map, and not knowing where you are headed.  You may well have decided on your final destination, but how on earth do you plan to get there?

Yes, many salaries in Israel are lower than comparable positions in other Western countries, and yes, the cost of living is high here – but that doesn’t mean that you can’t utilize your finances efficiently and become financially secure.  A “paradigm shift” is necessary in order to succeed in Israel.  Successful Olim learn to think differently about how they spend their money, and become more “Israeli”.  For example, the average Israeli family (2 adults and 2 children) spends about 2,200 NIS a month on food. The average Anglo family (which is generally larger) spends at least twice to three times that amount when they come to Israel.  You may well have to adjust your spending patterns and priorities as the disposable income here is considerably lower.  You have to be pro-active and focus your resources and priorities on where you are going to spend your money.

Putting together an initial estimate of possible expenses is a crucial first step.  But it’s not enough to gather information and estimate future expenses.  The next step is to create and evaluate your plan: what’s really important and what can you live without?  What aspect of your current standard of living are you prepared to do without, in order to live a financially stable existence in Israel?

The most common mistake that people make when constructing a financial plan is not to distinguish between wants and needs. Do you really need that new gadget/car/trip, or is it something you want to have? We have been conditioned to blur the lines between them.  If you have enough disposable income, then go ahead. But if you are struggling to make it through the month on an Israeli salary, ask yourself some hard questions. There’s always a tradeoff; you’re either spending the money now or saving it for something down the road.  If you can’t afford it, you simply need to postpone it temporarily or permanently.  Because disposable income in Israel is generally less than in most developed Western countries and prices in Israel are relatively expensive, distinguishing between wants and needs will make all the difference.

Obviously, I am not addressing those who earn well below the minimum standard of living.  I am talking about the average family in Israel who spends approximately 12,000-13,000 NIS a month (the average for Anglos I believe is significantly higher).

Years ago I read a book that described the average millionaire in the US – which would apply equally to the average millionaire in Israel.  The entire book had just one message.  Contrary to most people’s preconceptions, the average millionaire was not born with a silver spoon in his/her mouth, or the recipient of a triple digit salary.  Believe it or not, it was someone who merely spent less than they earned, and saved money consistently and effectively over a long period of time.

The average Israeli won’t necessarily become rich by following a plan, but by showing fiscal responsibility we have the ability to ensure our resources are being used efficiently leading to long-term financial security.

Complaining about the high cost of living and low wages, and blaming your overdraft on the prime minister, is akin to sticking your head in the sand.   By all means put pressure on the government to improve the situation, but until that change happens – learn to plan so that you can maximize what you have!